May 15, 2013

How Dumb People Become Successful

After a few years in the business world, something occurred to me. I realized that the majority of the people I met in business were astonishingly stupid.

Years later I was sitting around a bar with a couple of my agency colleagues. We had won a very important piece of business from a world class client. We were working with the very top people at the client and we were astounded by their shallowness.

A few drinks into the evening one of my colleagues turned to me and said, "I keep thinking that some day we'll meet the smart ones."

At that moment I recalled a conversation I had had years earlier. A friend introduced me to a business concept he called "achieving orbit."

With enough energy, a satellite will escape the gravitational pull of earth and will achieve orbit. Once it achieves orbit, it operates on its own. It will circle under its own power for years. And the only way to knock it down is to get in its way.

Businesses are like this, too, he claimed. After a certain period of success, they can achieve orbit and stay successful without much added energy.

Many companies are powered by products or services initiated years or even decades ago. And barring a horrible accident, they will stay in orbit. They persevere largely on inertia.

That's why all the monkeys running around having meetings and writing memos really aren't doing that much harm. It's why clueless managers really can't do too much damage. It's why all the CEOs and COOs buzzing around in their golf carts usually aren't fatal.

Of course, there are some industries, like technology, that need constant updating. But think about the market leaders in automobiles, food, soda, beer, fast food, dairy, snacks, candy, paper towels, toasters...for the most part, the market leaders today were the market leaders 30 years ago.

From time to time there come along some people who are so stupid that they knock a successful company out of orbit. But mostly, orbiting companies consist of people running around in circles pretending to make contributions. As long as they don't mess with the color of the box, or build a 3-wheeler, or change the flavor to grape, they usually can't screw things up too badly.

Businesses are successful in spite of all these monkeys, not because of them.

True, Bob. It takes a long time for the momentum of leadership to dissipate. The momentum keeps companies moving until after the "monkeys" have gone—those who engineered the conditions for slow, almost imperceptible decline have likely retired before anyone recognises a problem. And such slow, systemic decline is hard to reverse.

If we leave tech companies aside—not forgetting, of course, that it is a growing sector of world economies—it's true that many of the big names of 30 years ago still maintain their leadership today. But extend the timeline to forty years, and the pattern looks different.

Take cars. The big names like Toyota or Honda were smaller players. Kia and Hyundai were almost unheard of. Major global players, dominated by US multinationals, had a grip on many developed markets. Arguably, that span of forty years has allowed a number of players to rise, peak and enter that long decline of squandered opportunity. And NOT acting has forced once-clear leaders into an unseemly share battle with usurpers.

Yes, Kellogg and General Mills lead in cereals. But what happens when more people eat breakfast out of home? Kellogg leads in kids cereals, but what happens when tehre are fewer kids Yes, McDonalds still leads handsomely in fast-food, but it has found the need to extend into coffee in many places, to compete with companies like Starbucks. (And by the way, thirty years ago Starbucks had six stores.)

You're right, though. On a day-today level, marketers can seldom stop a brand in its tracks—arguably, even Coca-Cola emerged from the New Coke episode stronger.

On the other hand, just because momentum is powerful doesn't mean you don't need to manage it. Steering the juggernaut toward opportunity and away from oblivion takes active management decisions. These often sit above the level of new flavours, new packaging, even new "positioning". Managers are just as capable of getting them wrong as getting them right—Kodak and IBM, respectively.

"Monkeys", as you call them, can mess things up. But generally they make their bad decisions in response to bigger problems. And the slow decline is simply hastened, not caused.

The Peter Principle is a proposition that states that the members of an organization where promotion is based on achievement, success, and merit, will eventually be promoted beyond their level of ability. The principle is commonly phrased, "Employees tend to rise to their level of incompetence."

The agency I worked for had just pickled up a new client. In our first meeting with the brand manager he told us "This brand is over 100 years old, if you think we are going to F_ _ _ this up you're wrong. We are going to do the same thing as we did last year"I think at this point in time that brand is now a minor consideration in the segment.

Too many people's knowledge of business, like their knowledge of the law or of science, comes from movies. Screenwriters often know nothing of business. My experience suggests it is nothing short of a miracle when anything in business is done well.

Very astute Bob. There is always the lower 20% at risk which is why there are many craft beer success stories for example. You can't out Bub/Coors/Miller in the mass production game. But you can beat the smaller often premium segment with better stuff. There is plenty of mass produced/mass consumed crap that will never die. Until someone dies from it then it can go away. See Owens Corning.

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It's not just 'smarts' that make a difference - personaliity does, too.

A colleague and I once worked out a simple segmentation of clients, in a four box matrix. (I know you like simple analyses, so I hope you like this one). The two axes are: vertically, 'smart - dumb' and horizontally, 'nasty - nice'.

"Smart-nice' is a delight to work with, great things are possible. All too few of these.

'Smart-nasty' is a challenge, but keeps you on your toes. There are more of these.

'Dumb-nice' bring out your mothering instincts, just to stop them from screwing things up. Their hearts are in the right place, they're open to ideas (as long as they're properly explained). They tend to be the largest segment.

The real problem children are the 'dumb-nasty' quadrant. They can't see that you're trying to help them, and just want to screw you over, regardless. I've only had two of these in a whole career, but they were absolute nightmares to deal with. Surprisingly, their colleagues didn't always recognise this. They just saw them as 'tough negotiators', not the dumb, destructive arseholes they really were. Usually some deep- seated sense of personal inadequacy here. (Short people are over-represented).

There are two industries that I've had the fortune of serving that this behavior seems to be the norm.

I've generally found casinos to be the absolute worst. Guys who make decisions in casinos seem to think their business success is owed their prescience and acumen - not the fact that their business model is predicated on a mathematically stealing money and that the law prevents competitors from opening up and stealing their business. If there's great casino advertising, I sure haven't seen it.

Banks suffer from a similar problem. It amazes me how bank managers capable of extended vision on long-term views in managing financial assets, but have no ability to apply the same skill set to their own brand. The end goal for most of the higher-ups I've worked with in the banking industry is to survive long enough to get bought out by Wells Fargo. That's a mindset that's as conducive to orbit as it gets.

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